[draft] Reorganize inflation plan on Atom

#1

Relatively high inflation of ATOM has two major purpose - (1) incentive for staking and (2) incentive for participation of validating. Currently it looks like both purposes are successfully aligned(very quick staking ratio growth and great validator community)

But, the current inflation dynamic makes people unable to determine the long term inflation rate or ultimate hard cap of ATOM supply. I think most of us in the Cosmos community believe that tx fee rewards will at least partially replace the inflation rewards in 3~5 years.

Even though some coins have relatively high inflation currently, most top-marketcap coins show promises that long term inflation of the coin will converge to 0~5% per year. I think reasonably low inflation rate in long term is one of the most important factor for crypto-currency investors.

I clearly understand that staked ATOM is not affected by high inflation dilution effect, therefore high inflation practically might not scare ATOM stakers even in longer term. But, I think completely undecided inflation planning and relatively high inflation definitely can be seen as lack of due diligence and responsibility of bringing product(ibc/ethermint) in expected timeline.

Therefore, for better communication with the crypto-currency market, and to provide confidence on the product deliverying real-usecase functionality of Cosmos, I suggest a fixed hard cap of ATOM supply in the blockchain.

I suggest 320,000,000 ATOM as the hard cap of ATOM supply, which is about 135% of current total supply. It implies about maximum 3~5 years of inflation then ultimately converges to zero inflation in less than 5 years. However, the number 320,000,000 is subject to be discussed within the community.

Also, alternative approach is to cap the inflation rate to reasonably low level(ie. 2% per year) after total supply reaches 320,000,000 ATOM.

Please share thoughts on this topic!

In addition, I think this topic is not for quick decision. I hope many discussion come along so that we can carefully review possible outcomes.

Another alternative is to present gradual decrease of inflation level for several years so that the inflation range become in reasonably low level in long term.

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#2

Thank you for starting this conversation on Forum!

My question is what would motivate people to stake/lock their $ATOMs when we cap inflation to 0%? You are right that validators would still get tx fees but for delegators, there seems no upside in putting tokens at risk.

#3

from followed discussion with various validators and community members, I found several consensus on this topic.

  1. Current 7~20% inflation range gives people too dilutional perception and lack of confident roadmap and firmed plan on Atom total supply management.
  2. Current maximum inflation 20% is too high with given circumstances. 7~20% is decided long time ago and it is a good subject to be discussed for a change now.
  3. Inflation should be lower than now in the long term.
  4. But, inflation shouldn’t reach to zero even in the long term because it is needed to incentivize bonding. Therefore total hardcap supply was not a direction for consensus.
  5. Minimum inflation reaches to zero in the long term.
  6. Long term maximum inflation can be lower than now in the long term(or right now), but we cannot expect how low.

For your question, consensus was that minimum inflation can be zero when stake ratio is very high(it means the incentive from only transaction fees reward is enough), but we shouldn’t cap inflation to zero percent.

So, from my first post, total supply hardcap and long term zero cap inflation options should be removed based on community’s opinions.

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#4

Well actually, tx fees are split amongst delegators just like rewards.

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